Filing business taxes is something that many small businesses find intensely challenging. While large conglomerates set up entire teams of lawyers and accountants to get them the best deals on taxes, when the brunt of paying taxes hits small businesses, it can manifest into an anxiety-filled week at the office. So, if you are still working extra hours due to IRS woes, here is a step-wise guide on how to file business taxes for your small business.
Thoroughly Research Tax Regulations
Not all small businesses are subject to all the taxes required by either the federal government or the IRS for an industry. Even the exemptions are not uniform across an industry. Taxes are a subjective issue, and to deal with them, and avail the exemptions your business deserves, you need to dive in and research all about taxes in your field.
The most reliable sources of research are the entities in charge of taxations, like the IRS for federal income, and state secretary and/or department of revenue for business taxes. Further, local businesses’ taxes on income are also handled by the department of revenue for your state. And the local business registration office will handle all the details related to property and the rest of the taxes. So, make sure to gather all the information available on each of these portals.
One quick tip, small business owners are liable to pay self-employment taxes for social security or medicare on the profit. And only businesses earning less than or exactly $400 a year are exempt. You can calculate this based on the FICA tax (Social Security and Medicare) as applicable, when you file business taxes online.
Also Read: How to Take the Stress Out of Tax Time
When do businesses have to file taxes? Know for sure
Taxes are as stressful as they are due to the deadlines and the high chances of missing these. So, you should absolutely be sure of the due dates. Mostly, small businesses share the income tax return due date with the personal tax return due dates. This is around April 15. In 2020, this was extended, given the pandemic situation. It is also subject to hostile weather conditions, area-wise, if any.
Further, you can request an extension of six months for tax returns. However, this never includes an extension on payments.
Maintain documentation and fill out forms
The business tax return form has to be filled duly by small businesses, including sole proprietors and private single-member LLCs. This requires a lot of thorough documentation.
Most businesses will need to file, Schedule SE forms for self-employment tax, and Schedule C forms for costs of goods, revenue, tax deductions etc. Small businesses need to provide verifiable information for any business expenses included as tax deductibles. It is important to note that entertainment expenses are not included as deductibles anymore.
Also Read: Money Managing Tips for Small Businesses
Streamline filing with invoicing software
Maintaining structured reports can be cumbersome for most small businesses, and therefore, it is highly recommended that you use invoicing software that allows you to document taxes.
This is extremely helpful for filing Schedule C and Schedule SE forms, both of which require standardized information uniquely formatted. Also, since most invoicing software solutions enable users to add tax credits, and adjustments as applicable, it makes filing taxes a lot easier.
Sales tax forms in Schedule C require you to include receipts, so businesses using expense tracking software can leverage auto-generated e-receipts for the same.
File taxes through official channels
When it comes to the actual process of filing, you can do it physically by mail or file business taxes online free. Electronic filing of tax forms is also an option convenient for small businesses, as listed on Form 1040 by the IRS. However, do make a note of any additional fees when using tax preparation software.
With the right combination of software and operations, paying taxes on small businesses can become a cakewalk. Hope this guide serves you well for the next tax season.